The Department of Housing and Urban Development has published a final rule that expands its offerings of FHA adjustable-rate mortgages (ARM). Potential homebuyers will be able to choose ARMs with fixed-interest rate periods of one, three, five, seven or ten years, depending on their needs. Previously, HUD only offered FHA ARMs with a one year fixed rate. The new hybrid ARMs program was proposed by President Bush in an effort to increase opportunities for homeownership, particularly for minority families.

"President Bush challenged all of us to work to close the minority homeownership gap," said Acting HUD Secretary Alphonso Jackson "This will be an important tool to help create such opportunities for minorities and all Americans who are on the doorstep of homeownership."

Under the rule, which takes effect April 10, the interest rate for 1-year, 3-year and 5-year ARMs cannot change by more than one percent per year after the fixed-payment period is over, with a maximum change of five percent for the life of the loan. For 7-year and 10-year ARMs, the maximums are two percent annually and six percent for the life of the loan. 40,000 families are projected to take advantage of the hybrid ARMs program annually.

Other initiatives include:

* The Zero Downpayment Program, which would enable potential homebuyers to buy an FHA-insured home without having to put any money down. An estimated 150,000 families a year could achieve homeownership through this program;

* Creating the American Dream Downpayment Initiative, which will provide $200 million to help 40,000 low-income families each year with downpayment and closing costs;

* Instituting a single-family tax credit, designed to increase the supply of affordable homes;

* The FHA Payment Incentives Program, a new sub-prime loan product to offer FHA insurance to families with credit problems who would otherwise be charged higher rates in the private sector or not get a loan at all, and

* Expanding funding to $45 million in FY 2005 for housing counseling programs, which help families to better understand the home buying process and educate them against unscrupulous lenders.

For more information about HUD and its programs, check out www.hud.gov and espanol.hud.gov.

~Dan Hoffman